Contrasting Tapestry (NYSE:TPR) & GAP (NYSE:GAP)

Tapestry (NYSE:TPR) and GAP (NYSE:GAP) are both retail/wholesale companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, profitability, earnings, analyst recommendations, institutional ownership, risk and valuation.

Volatility and Risk

Tapestry has a beta of 1.57, indicating that its share price is 57% more volatile than the S&P 500. Comparatively, GAP has a beta of 2.1, indicating that its share price is 110% more volatile than the S&P 500.

Earnings and Valuation

This table compares Tapestry and GAP”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Tapestry	$7.01 billion	3.24	$183.20 million	$0.63	174.23
GAP	$15.17 billion	0.56	$844.00 million	$2.34	9.76

GAP has higher revenue and earnings than Tapestry. GAP is trading at a lower price-to-earnings ratio than Tapestry, indicating that it is currently the more affordable of the two stocks.

Dividends

Tapestry pays an annual dividend of $1.60 per share and has a dividend yield of 1.5%. GAP pays an annual dividend of $0.66 per share and has a dividend yield of 2.9%. Tapestry pays out 254.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. GAP pays out 28.2% of its earnings in the form of a dividend. Tapestry has raised its dividend for 3 consecutive years and GAP has raised its dividend for 1 consecutive years. GAP is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a summary of recent recommendations for Tapestry and GAP, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Tapestry	0	5	18	0	2.78
GAP	0	11	7	0	2.39

Tapestry currently has a consensus target price of $115.60, suggesting a potential upside of 5.31%. GAP has a consensus target price of $25.75, suggesting a potential upside of 12.74%. Given GAP’s higher possible upside, analysts plainly believe GAP is more favorable than Tapestry.

Profitability

This table compares Tapestry and GAP’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Tapestry	2.61%	68.02%	13.01%
GAP	5.86%	27.04%	7.49%

Insider and Institutional Ownership

90.8% of Tapestry shares are owned by institutional investors. Comparatively, 58.8% of GAP shares are owned by institutional investors. 1.3% of Tapestry shares are owned by insiders. Comparatively, 30.6% of GAP shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

GAP beats Tapestry on 9 of the 17 factors compared between the two stocks.

About Tapestry

Tapestry, Inc. provides luxury accessories and branded lifestyle products in the United States, Japan, Greater China, and internationally. The company operates in three segments: Coach, Kate Spade, and Stuart Weitzman. It offers women’s handbags; and women’s accessories, such as small leather goods which includes mini and micro handbags, money pieces, wristlets, pouches, and cosmetic cases, as well as novelty accessories including address books, time management and travel accessories, sketchbooks, and portfolios; and belts, key rings, and charms. The company also provides men products, which includes bag collections, such as business cases, computer bags, messenger-style bags, backpacks, and totes; small leather goods including wallets, card cases, travel organizers, and belts; and footwear, watches, fragrances, sunglasses, novelty accessories, and ready-to-wear items. In addition, it offers other products including women’s footwear and fragrances; eyewear and sunglasses; and jewelry, such as bracelets, necklaces, rings, and earrings, watches, and other women’s seasonal lifestyle apparel collections, including outerwear, ready-to-wear and cold weather accessories, such as gloves, scarves, and hats. Further, the company provides kids items, housewares, and home accessories, such as fashion bedding and tableware, stationery, and gifts. It offers its products through e-commerce sites and concession shop-in-shops, wholesale, and third-party distributors under the Coach, Kate Spade, and Stuart Weitzman brand names. The company was formerly known as Coach, Inc. and changed its name to Tapestry, Inc. in October 2017. Tapestry, Inc. was founded in 1941 and is headquartered in New York, New York.

About GAP

Gap, Inc. operates as a global apparel retail company, which offers clothing, apparel, accessories, and personal care products for men, women, and children. The firm operates through the following segments: Gap Global, Old Navy Global, Banana Republic Global, Athleta, and Other. The Gap Global segment includes apparel and accessories for men and women under the Gap brand, along with the GapKids, BabyGap, GapMaternity, GapBody, and GapFit collections. The Old Navy Global segment offers clothing and accessories for adults and children. The Banana Republic Global segment provides clothing, eyewear, jewelry, shoes, handbags, and fragrances. The Athleta segment offers fitness apparel for women. The company founded by Donald G. Fisher and Doris F. Fisher in July 1969 and is headquartered in San Francisco, CA.